Will house prices crash?? If so when??

Question

I would love to buy my own place instead of renting, but as a single person it seems impossible. i earn a reasonable wage but have a less than perfect credit record. Can prices stay so high in the uk forever, or will they soon crash???

Answer 1

This may disturb some of you. This may surprise some of you. This may disappoint some of you. But it has to be said.



After denying it for sometime, to you dear reader and even to myself, the truth is now clear. And you should now read this blog in the context of what I am about to say.



I am rooting for an epic housing collapse, a disastrous recession, the collapse of the stock market, a complete replacement of our current partisian leadership, a questioning of our country's current economic model, and a severe and historic financial meltdown.



Period.



Before, I thought just a correction would do the trick. A cleansing of the debt-and-greed-fueled housing balloon we as a society created.



But I've come to the conclusion that will not be enough to right the wrongs and fix the problem, so that future generations will not be burdened with the current generation's misguided and self-centered ways.



Pure and simple, I want Change (with a Capital C), and I now feel that only an historic financial meltdown will create the environment where Americans wake up from their current slumber, and call for new leadership, new thinking, and above all, change.



Something went awry in the US over the past decade. Something changed, with our government, our system, and our collective conscious. And this change was not for the better.

Greed overcame and infected so many of us - the idea of getting rich without working, and an overwhelming need to consume, consume, consume. We no longer worked for the benefit of our common man - we worked only for ourselves. We said "screw the next generation - I want mine, and I want it now!". And we went on a debt-fueled orgy of spending, never stopping to look at the bills coming due, and never stopping to think about the repercussions.



Now, dear reader, it's time to stop. It's time to pause, and consider where we went wrong, and above all, how we can fix it.



So, in conclusion, the fate that awaits us, this cleansing of our ways and of our system, in the form of an epic real estate market and financial collapse, in my simple opinion is a fate of necessity, and will serve as a catalyst for needed Change.



And away we go. Good luck to all of you, and know that I believe that we will come out of this stronger, wiser and determined to Change.

Answer 2

I;m not sure but the point that has been missed so far is that the uk currently has a high percentage of house ownership compared to other european countries where people often buy once they reach their late thirties and forties.



I'm not currently sure what rental prices are doing but i suspect they are probably going up. In the south east I believe there are not enough properties for rent and so supply can drive prices.



I would suspect there will be more buy to let investors coming into the market, it is still a relatively young market, people have been renting out property for years but only in the last 10 have we had off the shelf mortgages to manage the transaction. This has made this type of investment considerably easier.



My advice to you is be creative look for bargains, consider buying property in whatever way you can. Buy as part of a team or buy to let in an area you can afford and rent to others, if the area you live in is too expensive.



There will possibly be a correction but I wouldn't count on it, the current indications don't have it being likely. I think it's probably wishful thinking on those that want to get into the market. Might sell a lot of papers if someone predicted it but think the economy is heading towards even greater stability into the future.



I want one too and I own property already but i don't think it will happen.

Answer 3

Mate who ever is telling you this non-sense is talking absolute rubbish. The news papers and the press have been saying that the market is going to crash for the last 7 years. I dont deny at some point it will crash but the world will also end at some point.

Anyway the point im trying to make is that there is no reason for the market to crash in the foreseeable future . firstly there are more people wanting to buy property than there is property to sell. Secondly mortagage rates are very low, yes I know they went up by .25% last month big deal. what caused the last crash was mortgage rates going up to 15% the current base rate is 4.75% so think yourselves lucky. If you are causious like me opt for a 5-10 year fixed rate that way even if the market takes a nose dive you can ride it out. And remember negitive equity only becomes an issue if you cant afford the repayments other than that it is the same property that you bought just live in ti and wait for the market to recover.

Answer 4

IT IS A BUBBLE MATE !

Don't buy now unless you can afford to loose 10, 20 maybe 30 % of your money.

Why do you think you need a 10% deposit plus legal fees ?

BECUASE PRICES WILL GO DOWN AT LEAST 10 %

Why need a good credit record ?

SO YOU WILL BE MUG ENOUGH TO KEEP PAYING A MORTGAGE MORE THAN YOUR HOME IS WORTH !

Prices are massively inflated and with internet people can "teleport" themselves about !

Why are call centres in the Philippines, Bulgaria, India ?

Why are products made in China ?

What is so good about UK ? IT RAINS A LOT !

You will need to spend money on your roof repairs !

YOUR HOUSE WOULD EAT MONEY !

Even if prices go up you must fix the house then

prices are the same but you pay 6, 7, 8 percent

interest so does it make sense ?

ONLY if you are like me and LOVE THE UK !

House is for very long term, so only if you

really love the UK and forake other countries does it make

any sense to buy here !

BUY a house in Bulgaria, Poland, the Philippines, Argentina,

the prices are reasonable and the sun shines (more than in UK).

Just save up cash in UK and sleep on the floor !

UK is a great place but you really have got to love it to stay !

Answer 5

they're already beginning a long hard crash landing in the US, by the sound of it in the UK it has been as ridiculous an ascent into the stratosphere of utter unaffordability as here.

It won't be long before the descent happens, but don't be tempted to buy til you can afford it relatively reasonably and some semblance of a serious correction in prices has occured as well. By then perhaps your credit will be better too. Enjoy your life, don't worry about owning, until it doesn't seem such an awful burden to bear for the privilege of paying the bank on a big debtnote instead of a landlord. Especially especially if it costs quite a bit less to rent the equivalent place. That difference reflects the high level of speculation happening, and it will end, sooner rather than much later I suspect.

good luck!

Answer 6

I am a Mortgage Broker from Washington State and this was a discussion in our office a couple weeks ago.



Over here the housing market is a part of our economy. One of my co-workers pointed out that when the stocks are up, the housing market is slow. When the housing market was booming a couple years ago, the stocks were down.



Rates have been going up for the last 19 months. Right now the going rate is 6.5% in Washington. You can still find rates cheaper if your credit score is good. The rate has not changed in Washington for the last 3-4 weeks. More than likely the rates will not go up for a while.



When the housing market is slow, rates stay steady. When there is a demand for homes the rates go up.



I have never been to the UK and do not know how the system works over there. But, if the housing market is a big part of your economy over there, I would think that your government would step in to help out and not allow the market to crash.

Answer 7

The general consensus is that we will not seen a market crash that happened in the 80s because of the change to the UK economy management by successive Govts.



However the price rises that have been experienced have started to slow, plus we had a rate rise last month and another is predicted for November which the Bank of England hope will cool the market.



So the question you probably need to ask is, will I be able to afford to repay my mortgage if the rate rise, and therefore should I consider something like a Fixed Rate or Capped product?



If you credit record is not so great that might limit your choice to which lenders you can approach.



Check out some great sites like Money Super Market or Moneyfact to check the different deals available

Answer 8

If you look at the long term trend in UK house prices, then prices now are only slightly above the long-term trend-line. In the past the housing market has followed the stock market. Last time round the housing market did not follow the stock market (down) but continued to rise. This caught a lot of experts by surprise. How did the housing market avoid following the stock market? Increased lending with relaxed criteria, continued low interest rates, buy-to let brigade. So the predictability of crashes has altered. There does not appear to be any immediate driver for a crash. This does not answer you question I am afraid but what can you do? If you buy buy cheap - look for bargains, buy where you can add value for example through renovation or extension, with lettable rooms (in case you need to increase your cash-flow)

Answer 9

In the absence of any external factor e.g. sharp rise in interest rates, geological disaster, wars, recession; then there is little else to stop property prices from rising.



The market is very innovative, with first time buyers clubbing together, and lenders inventing new ways of lending money. One recent example is the lifetime mortgage which was introduced last week. Its an interest only mortgage which continues indefinetely, and the children can opt to inherit the mortgage off their parents etc.



There will eventually come a point when it becomes impossible for an average first time buyer to afford a mortgage, and this is likely to result in a cooling off rather than a price crash.

Answer 10

House prices are too high, but the goverment are keeping them high by not building more.Too many people are chasing too few properties.I cannot see it continuing because people like yourself are being priced out of the market, which affects sellers further up the chain.You only have to go back to 1992 to see a property crash. Negative equity will come around again. The country will go into a recession and people will be handing their keys into building societies again.I'd wait until 2007 at least.

Answer 11

House prices in the UK have never really crashed, if you look at it over any length of time greater than 2 years. There is no evidence to suggest that this will change over the forseeable long term future.

Prices have fluctuated as has the rate of increases and we have experienced a longish period of rapid growth, but there will not be a lowering of prices unless there are some massive cultural changes i.e. people stop living on their own or children staying in the parental home for much longer.

Go look at history, houses offer the most stable investment there has ever been.

Answer 12

History always repeats itself. So, soon or later, there will be a correction.



Usually when EVERYONE says real estate is the best invesment, then that is probably the peak of the bubble. Then the slow, painful downturn will take over for a few years.



How to value a property during market downturn?



Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.



Let's use following example:



Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.



If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.



In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.



It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.



Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.



It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.



One may ask, why is there a discrepancy between two perspectives of the buyer and owner?



The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.

Answer 13

Unfortunately they're not going to crash until we can all use teleporters to get to work and don't all try and live as close to the office/commuter belt as possible.

Lower your expectations and get on the property ladder. A studio flat for a couple of years is better than throwing money away on rent. Have you considered buying jointly with friends/family?

Answer 14

in the next 5 to 10 years

Answer 15

I don't think they will crash, I think they will level out, and may go down slightly. I would say buy as soon as you can afford to, but don't overstretch yourself. Maybe you could buy with a friend, a lot of people are doing that these days, you just get a legal document drawn up that says what to do if one of you wants to sell.

Answer 16

house prices will take a hit in the next 4 years however single family homes will be hurt the least, then condo's, then multy families, apartment buildings, very high priced ($750k+) and then commerical property the most.

Answer 17

I think they will continue to rise because of the increasing number of first time buyers trying to get into the market

Answer 18

as long as they dont crash below £5000 which is what i paid for this one 10 years ago..i will be ok thanks..now worth £135000 but if they do you watch interest rates go back to 32%+

Answer 19

http://www.breakingbubble.com/index.htm

nut sure about the UK but if they messed up the market like they did hear you and everybody else is screwed.

Answer 20

I think they are going to remain stable.